Some Still Expect Wall Street to Taste the Fear

Yesterday's advance came in light volume and failed to convince many bearish technicians out there.

Author:: Justin Lahart
Publish date:: May 27, 1999 9:20 AM EDT

People who spend their days looking at stock charts didn't think much of yesterday's rally. After watching stocks grind lower in light volume for over a week, they figured the market was in the midst of a decline that wouldn't end until Wall Street tasted fear. Until we saw a day of big declines on big volume that would knock the complacency out of the market. Yesterday was just a momentary bubble in a decline. A sucker's rally.

If any one group relies on technical analysis, it's the people who trade

S&P 500

futures. It should not be a surprise that they sold the futures yesterday after the stock market closed and continued to sell them overnight in the electronic session.

The real question is whether that early selling will hold, and here it might be worth remembering a little history. The last time before Tuesday the S&P 500 got down around 1285 was on April 19. April 20, stocks rallied higher. People didn't believe in the rally, though, and April 21 we were heading into a lower open. But stocks rallied again, and by April 22 the S&P was at 1358.

"It wouldn't shock me if we had some type of bounce, because the market has tended to rally into holidays," said Bill Meehan, market analyst at

Cantor Fitzgerald

. "But I still feel very uncomfortable with the markets."

At 9 a.m. EDT, the futures were down 5.1, about 8 below fair value, indicating a drop at the open.

Treasuries showed little reaction to revised first-quarter

gross domestic product

figures, which came in basically in line with market expectations. The long bond was off 1/32 to 92 5/32, putting the yield at 5.81%.

Watching those S&P futures trade lower gave Tokyo traders little faith in Wall Street's rally yesterday. With little news on the domestic front, it was a choppy, futures-driven day. The

Nikkei

fell 53.3 to 16,177.19.

With Sino-U.S. relations not looking any better after yesterday's congressional report accusing China of stealing nuclear weapons plans, Hong Kong stocks did not fare too well. The

Hang Seng

dropped 100.63 to 12,308.53.

Expectations of a lower New York open sent European indices lower. In Frankfurt, the

Dax

was down 45.15 to 5115.29. In Paris, the

CAC

was off 17.91 to 4358.77. And in London, the

FTSE

was down 47.8 to 6189.